Fair Isaac (FICO) Q2 EPS beats by $1.53; revenue $692m, guidance raised

Fair Isaac Corp. reported fiscal second-quarter earnings on 28 April that beat analyst estimates on every line, raised its full-year revenue and profit guidance, and pushed the stock up roughly 4.4 per cent. Mortgage origination volumes more than doubled year over year, the largest single contributor to a 38.7 per cent jump in revenue.

The San Jose-based credit scoring and analytics company posted revenue of $692 million for the quarter ended 31 March, 9.1 per cent above the consensus estimate of $634 million. Adjusted earnings per share came in at $12.50, $1.53 ahead of the Street’s $10.97. GAAP net income rose 63 per cent to $264 million, or $11.14 per share.

Shares closed at roughly $1,055 on the day of the release, up from $1,011 the prior session.

The company lifted full-year fiscal 2026 revenue guidance to $2.45 billion at the midpoint, a 4.3 per cent step up from the prior $2.35 billion target. Full-year GAAP net income guidance went to $825 million.

What drove the quarter

CEO William Lansing pointed to a 127 per cent year-over-year jump in mortgage revenue. He attributed the surge to higher prices and improved origination volumes during a window when interest rates eased from their late-2025 peaks. CFO Steven Weber, fielding a Deutsche Bank analyst question on the post-earnings call, said the uptick in originations exceeded the company’s own forecast.

The Scores segment, which licenses the FICO Score to banks, credit card issuers and mortgage lenders, again carried the top line. Lansing told analysts that adoption of FICO Score 10 and related analytics tools by large US banks and fintechs continues to broaden, supporting recurring revenue and higher average contract values.

The B2B software unit posted annual recurring revenue of $788.8 million, up 10.4 per cent year over year and ahead of analyst estimates. The pace echoes the platform-driven growth pattern seen at peers such as AppLovin, where software unit gains drove the most recent earnings beat. Lansing pushed back on a Needham analyst’s suggestion that the company was forcing clients off legacy products.

“Migrations are customer-driven and the company is not forcing transitions away from legacy products,” he said.

Management also flagged a customer win at Absa, the Johannesburg-based banking group, which deployed FICO’s fraud and collections tools in what the company described as an award-winning implementation. The deal points to traction for FICO’s decisioning software outside the US mortgage market, where the FICO Score already serves as the de facto underwriting standard.

The quarter benefited from a macro environment in which 30-year fixed mortgage rates dipped below 6.5 per cent during January and February, fuelling refinancing activity before rates crept back toward 7 per cent in March. The Mortgage Bankers Association reported its refinance index rose in each of the first eight weeks of 2026, a pattern consistent with the volume surge FICO captured.

How the numbers stacked up

Adjusted EBITDA came in at $448.5 million, producing a margin of 64.8 per cent and beating the consensus estimate of $391.8 million by 14.5 per cent. Operating margin widened to 58.2 per cent from 49.3 per cent a year earlier.

The Zacks Consensus Estimate for adjusted EPS was $11.03, putting the surprise at roughly 13.3 per cent on that measure. MarketBeat data show FICO has topped consensus EPS in each of the last four quarters, a streak that puts the company in the same beat-train cohort as Victory Capital, which posted record quarterly earnings in its own Q1 release.

Market capitalisation stood at approximately $24.58 billion after the post-earnings move.

FICO 10T and the competitive picture

The competitive positioning of FICO 10T, the company’s latest scoring model, recurred throughout the analyst call. The model incorporates trended data, a methodology designed to capture how a borrower’s balances move over time rather than a single snapshot.

Wells Fargo analyst Jason Haas pressed Lansing on the $0.99 upfront pricing. Lansing said the price was set to encourage adoption and keep the model competitive against VantageScore, the rival model backed by Equifax, Experian and TransUnion.

“We have three of the top five resellers signed up,” Lansing said, adding that he expects broad lender interest once regulatory sign-off is secured. On VantageScore’s market share, Lansing was direct: “It’s trivial.”

Barclays analyst Manav Patnaik asked about the timing and lender feedback on the direct licensing programme for FICO 10T. Lansing said the pipeline is building and the company does not see a structural obstacle to adoption once the Federal Housing Finance Agency completes its review of the scoring model for mortgage underwriting.

Jefferies analyst Surinder Thind cut his price target on FICO to $1,700 from $1,800 on 4 May, citing valuation after the post-earnings rally, but kept his buy-equivalent rating. The stock remains well below that target.

The $0.99 cut on FICO 10T has drawn scrutiny. It departs from FICO’s historical practice of charging premium rates for each new scoring model. Industry consultants note the price is a fraction of the wholesale cost of a traditional tri-merge credit report, and that the revenue model shifts toward volume-based royalties rather than per-report fees. Lansing told the call the goal is to make FICO 10T the default score at as many origination touchpoints as possible before VantageScore builds meaningful lender adoption.

What comes next

The raised guidance implies the mortgage tailwind has further to run and that B2B platform adoption keeps compounding. The $2.45 billion midpoint for fiscal 2026 is roughly 17 per cent growth over the prior year, faster than the mid-teens pace FICO delivered in fiscal 2025. Lansing told the call the company is not banking on a sustained drop in rates. Market-share gains and pricing power are the more durable levers, he said.

The raised guidance also assumes the FHFA will approve FICO 10T for mortgages sold to Fannie Mae and Freddie Mac. The agency opened its formal review in late 2025. Approval would force lenders to adopt the updated model for new conforming loans, locking in the adoption cycle Lansing described.

Regulatory milestones are the swing factor. A delay, or a decision by the FHFA to accept VantageScore 4.0 as an alternative, would strip the mandated-upgrade catalyst from the Scores revenue line. The company’s disclosures put mortgage-related revenue at roughly one-third of Scores segment revenue in fiscal 2025. The FHFA decision is the single largest binary event on the horizon for FICO shareholders.

The call also drew a line of questioning from Huber Research Partners’ Craig Huber on VantageScore’s market share trajectory. Lansing dismissed the competitor’s position as negligible. Analysts noted that the pricing cut on FICO 10T itself argues otherwise. Cutting price on the flagship product is not what a company does when it views the rival threat as static.

FICO trades at roughly 30 times the midpoint of its raised full-year GAAP net income guidance. That is a premium to the broader software sector but in line with the company’s own five-year average. The quarter did not change the case for the stock so much as harden it. Pricing power, mortgage volumes and the FHFA decision are the three variables that move from here.